The European Commission has approved under EU State aid rules the compensation granted by Slovakia to electric utility company Slovenské Elektrárne a.s. for temporarily supplying a mandatory quantity of electricity from indigenous fuel sources into the Bystričany electricity system node in Slovakia.
Slovakia notified the Commission of its plans to entrust electric utility company Slovenské Elektrárne a.s. with a temporary public service obligation to ensure security of supply in the geographical area around the Bystričany electricity system node, which is insufficiently connected with the rest of the Slovak electricity grid.
Under the public service obligation, Slovenské Elektrárne will supply from its power plant in Nováky a mandatory quantity of at least 870 gigawatts hours and up to 1 100 gigawatts hours per year of electricity from indigenous fuel sources into the geographical area around the Bystričany node of the Slovak electricity grid.
The temporary public service obligation will be in place until the completion of investments to strengthen the Slovak electricity grid (intended to solve the technical issue behind the security of supply problem) and, in any event, no later than the end of 2023.
Slovenské Elektrárne will be compensated by the Slovak State for fulfilling this public service obligation, to cover the difference between its revenues from the sale of electricity and other services and its production costs. This compensation will be granted to Slovenské Elektrárne on the basis of a mechanism established by the Slovak electricity regulator.
The Commission assessed the measure under the EU State aid rules on services of general economic interest (SGEI). These rules allow Member States, under certain conditions, to compensate companies that have been entrusted with public service obligations for the extra cost of providing these services.
The Commission found that:
- the only electricity producers located in proximity of the Bystričanyelectricity system node are the Nováky power plant and some very small-scale hydropower units whose production capacities largely depend on water flows and seasonal changes. Without the public service obligation, the current power production infrastructure would not ensure reliable electricity supply for the geographical area around the Bystričany electricity system node,
- the measure is proportionate, as the expected rate of return for the Nováky power plant is in line with that of similar power units and does not lead to overcompensation,
- the measure is limited in time and will terminate once the new supply infrastructure is operational and, in any event, no later than the end of 2023.
Therefore, the Commission concluded that the Slovak measure is in line with EU State aid rules, as it promotes security of supply in the geographical area around the Bystričany electricity system node, without unduly distorting competition.
Article 107 (3) c) of the Treaty on the Functioning of the European Union (TFEU) allows Member States to grant aid for the development of certain economic activities. In this context, the EU Framework on services of general economic interest (see IP/11/1571 and MEMO/11/929) leaves Member States largely free to define which services are of general interest. However, the Commission must ensure that public funding granted for the provision of such services does not unduly distort competition in the Internal Market.
This State aid decision does not put into question the need for Slovakia to meet its legal obligations in terms of air quality, nor does it imply that the Commission recommends the use of brown coal (lignite) as a fuel, given its negative impact on air quality and climate. The Commission will therefore keep the situation in Slovakia under close review.
Slovakia was one of the first countries to join the Initiative for Coal Regions in Transition, in June 2018.
Slovakia is currently benefitting from technical assistance from the Structural Reform Support Service (SRSS), in order to develop a transition strategy and corresponding action plan for the self-governing region of Trencin, where most coal-related activities (coal mining and Nováky power plant) are located.
Both initiatives will address economic, social and environmental issues related to the transition away from coal in the region – including practical aspects such as employment alternatives for coal workers and options for adapting the current district heating system of the town of Prievidza, which uses residual heat from the Nováky power plant. The project started in October 2018 andthe strategy and action plan are envisaged for mid 2019.
The non-confidential version of the decision will be made available under the case numbers SA.52687 in the State aid register on the Commission's Competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.